a. Explanation Break-even Point: It refers to a point in the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even point, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows: Break-even point in Sales ( units ) = Fixed Costs Contribution Margin per unit Calculate the break-even number of passengers per flight. Fixed cost =$80,000 Contribution margin per passenger =$640 per unit (1) Break-even number of passengers per flight = Fixed costs Contribution margin per passenger = 80 , 000 $ 640 = 125 passengers Working note (1): Determine the contribution margin per passenger b. To determine Explain whether the airline should add the flight to its schedule. c. To determine Calculate the profit that each flight should produce. d. To determine List the additional issues that the airline might consider in the decision.

15th Edition

ISBN: 9781337902663

Author: WARREN, Carl S.

Publisher: Cengage Learning,

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Question

Chapter 20, Problem 1MAD

To determine

Calculate the break-even number of passengers per flight.

To determine

Explain whether the airline should add the flight to its schedule.

To determine

Calculate the profit that each flight should produce.

To determine

List the additional issues that the airline might consider in the decision.

Expert Solution & Answer

Chapter 20 Solutions

Financial And Managerial Accounting

Ch. 20 - Describe how total variable costs and unit...Ch. 20 - Which of the following costs would be classified...Ch. 20 - Describe how total fixed costs and unit fixed...Ch. 20 - In applying the high-low method of cost estimation...Ch. 20 - If fixed costs increase, what would be the impact...Ch. 20 - Prob. 6DQ Ch. 20 - Prob. 7DQ Ch. 20 - Both Austin Company and Hill Company had the same...Ch. 20 - Prob. 9DQ Ch. 20 - What does operating leverage measure, and how is...

Ch. 20 - High-low method The manufacturing costs of...Ch. 20 - Contribution margin Waite Company sells 250,000...Ch. 20 - Prob. 3BE Ch. 20 - Prob. 4BE Ch. 20 - Sales mix and break-even analysis Conley Company...Ch. 20 - Prob. 6BE Ch. 20 - Margin of safety Jorgensen Company has sales of...Ch. 20 - Classify Costs Following is a list of various...Ch. 20 - Identify cost graphs The following cost graphs...Ch. 20 - Identify activity bases For a major university,...Ch. 20 - Identify activity bases From the following list of...Ch. 20 - Identify fixed and variable costs Intuit Inc....Ch. 20 - Relevant range and fixed and variable costs Child...Ch. 20 - High-low method Ziegler Inc. has decided to use...Ch. 20 - High-low method for a service company Continental...Ch. 20 - Contribution margin ratio Young Company budgets...Ch. 20 - Contribution margin and contribution margin ratio...Ch. 20 - Break-even sales and sales to realize operating...Ch. 20 - Prob. 12E Ch. 20 - Prob. 13E Ch. 20 - Prob. 14E Ch. 20 - Break-even analysis Media outlets such as ESPN and...Ch. 20 - Prob. 16E Ch. 20 - Prob. 17E Ch. 20 - Prob. 18E Ch. 20 - Prob. 19E Ch. 20 - Prob. 20E Ch. 20 - Prob. 21E Ch. 20 - Break-even sales and sales mix for a service...Ch. 20 - Margin of safety A. If Canace Company, with a...Ch. 20 - Prob. 24E Ch. 20 - Operating leverage Beck Inc. and Bryant Inc. have...Ch. 20 - Classify costs Seymour Clothing Co. manufactures a...Ch. 20 - Prob. 2PA Ch. 20 - Prob. 3PA Ch. 20 - Prob. 4PA Ch. 20 - Prob. 5PA Ch. 20 - Contribution margin, break-even sales,...Ch. 20 - Classify costs Cromwell Furniture Company...Ch. 20 - Break-even sales under present and proposed...Ch. 20 - Prob. 3PB Ch. 20 - Prob. 4PB Ch. 20 - Prob. 5PB Ch. 20 - Contribution margin, break-even sales,...Ch. 20 - Prob. 1MAD Ch. 20 - Prob. 2MAD Ch. 20 - Prob. 3MAD Ch. 20 - Break-even number of guests for a theme park...Ch. 20 - Prob. 1TIF Ch. 20 - Communication Sun Airlines is a commercial airline...Ch. 20 - Profitability strategies Somerset Inc. has...Ch. 20 - Prob. 5TIF Ch. 20 - Analysis of costs for a shipping department Sales...Ch. 20 - Taylor Corporation is analyzing the cost behavior...Ch. 20 - Kimber Company has the following unit costs for...Ch. 20 - Bolger and Co. manufactures large gaskets for the...Ch. 20 - Eagle Brand Inc. produces two products as follows:...

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